Court Requires Contractual Service To Be Counted For Pension; Union Directed To Facilitate Option Under Rule 17

A bench of Justices Pamidighantam Sri Narasimha and Joymalya Bagchi heard appeals arising out of SLP (C) Nos. 19539-19540 of 2021 concerning whether periods of contractual service rendered by employees later regularised could be counted for pensionary benefits. The appeals challenged a Karnataka High Court order that declined to count the appellants’ pre-regularisation contractual service for seniority, service benefits and pension, while upholding protection of pay.

The Court partly allowed the appeals and directed the Union of India to grant pensionary benefit to the appellants in accordance with law. The Court relied on Rule 17 of the Central Civil Services (Pension) Rules, 1972 and on this Court’s decision in State of H.P. v. Sheela Devi. The Court, in its reasoning, observed: “17. Counting of service on contract - (1) A person who is initially engaged by the Government on a contract for a specified period and is subsequently appointed to the same or another post in a substantive capacity in a pensionable establishment without interruption of duty, may opt either :- (a) to retain the Government contribution in the Contributory Provident Fund with interest thereon including any other compensation for that service; or (b) to agree to refund to the Government the monetary benefits referred to in Clause (a) or to forgo the same if they have not been paid to him and count in lieu thereof the service for which the aforesaid monetary benefits may have been payable. (2) The option under sub-rule (1) shall be communicated to the Head of Office under intimation to the Accounts Officer within a period of three months from the date of issue of the order of permanent transfer to pensionable service, or if the Government servant is on leave on that day, within three months of his return from leave, whichever is later. (3) If no communication is received by the Head of Office within the period referred to in sub-rule (2), the Government servant shall be deemed to have opted for the retention of the monetary benefits payable or paid to him on account of service rendered on contract.” The Court further noted that “the contractual service period rendered prior to the appellants’ regularisation in 2015 must be counted towards the payment of their pensionary benefits”.

Background The appellants were appointed as Data Entry Operators under a temporary contractual Plan Scheme between 1996 and 1999 and were later regularised by an Office Memorandum dated 05.01.2015, with regular appointment orders effective 01.04.2015 w.e.f. 05.01.2015. They moved the Central Administrative Tribunal (CAT) seeking regularisation from the date of initial appointment or, alternatively, from completion of 10 years, and claiming protection of pay, seniority, service benefits and pension by counting the contractual period. The CAT allowed the application on 19.01.2016, protecting pay and directing counting of the entire period towards pension and counting of ten years for seniority and other benefits.

The respondents challenged the CAT order in the Karnataka High Court, which partly allowed the writ petition by setting aside the CAT’s directions insofar as counting the contractual period for seniority, service benefits and pension was concerned, holding that the initial appointment was contractual and not pursuant to Staff Selection Commission recommendation; the High Court confined consequential benefits to the date of regularisation while protecting pay. Before the Supreme Court the appellants limited their prayer to the grant of pensionary benefits by including the contractual period, relying on Rule 17 and the Sheela Devi decision. Accepting that contention, this Court applied Rule 17 and the Sheela Devi framework and directed the Union to indicate the mode and manner for exercise of the option under Rule 17 and to notify amounts to be remitted where applicable. The appeals were partly allowed and the High Court order dated 23.03.2021 was set aside to the extent indicated. No order as to costs was made.

Case No.: 2025 INSC 594 (Arising out of SLP (C) Nos. 19539-19540 of 2021) Case Title: S.D. Jayaprakash and Ors. v. The Union of India & Ors. Appearances: For the Petitioner(s): Mr. M.C. Dhingra, Senior Counsel For the Respondent(s): Mr. Vatsal Joshi, Advocate